Report: Charting New York’s Fintech Future
Between 2017 and 2018, investments in New York fintech companies nearly doubled from around $1.8 billion to more than $3.4 billion. With financial services directly employing 340,000 New York City employees and contributing about $8 billion annually to the city in taxes, it is imperative that New York leads in global fintech growth.
As home to the world’s leading financial institutions, New York City can uniquely spearhead and benefit from innovation. By nurturing young fintech companies and attracting fintech investment to the city, we are working to guarantee that New York leads the development and implementation of the new technologies shaping the global financial services industry. While Silicon Valley remains the world’s largest fintech cluster, New York is growing faster and continues to build its status as a powerful contender in this market.
The FinTech Innovation Lab owes its success to the full support of New York’s technology and financial services sector. They have been instrumental in shaping our efforts and identifying the fintechs that will dictate the future of the industry. What follows is their collective wisdom on where the fintech sector is headed over the next several years.
Trend No. 1: Artificial intelligence (AI) and machine learning (ML) will become invisible
AI and ML are maturing at a rapid pace and financial services firms are starting to deeply embed these technologies throughout their organizations. As AI and ML become ingrained in user interfaces, they will be truly invisible to the user.
Trend No. 2: The Internet of Things will revolutionize insurance
The proliferation of Internet of Things sensors and wearables will provide insurance companies with the data they need to assess, manage, control, and price risk in real-time. This proliferation of data will both challenge and help the insurance sector. Insurance products will become commoditized as pricing is increasingly based on similar data sets, although access to unique and proprietary data sources will mitigate the commoditization. At the same time, there will be expansion opportunities in underwriting new risks, such as climate change, and risks to supply chains, geopolitics, cybersecurity, reputation and intangible assets.
Trend No. 3: Fintech companies are bundling financial products and traditional banks are noticing
The industry continues to recognize the value of an integrated, vertical fintech strategy. The unbundling of services that smaller fintechs have focused on over the past decade is giving rise to re-bundling in the form of challenger banks with digital, tech-enabled platforms that offer a suite of services. In response, incumbents are building their own brands and challengers, such as Marcus by Goldman Sachs and Capital One’s 360 Money Market.
Trend No. 4: Blockchain is edging towards production
Blockchain and distributed ledger are moving beyond hype toward production. In addition to driving efficiencies in securities settlements, financial services leaders are looking to blockchain to increase transparency and efficiency for many financial business flows that span the borders of multiple enterprises. There is additional value in new products and services that can be created through the use of shared sources of truth, tokenization, and smart contracts.
Trend No. 5: The shift toward the cloud and software-as-a-service (SaaS) is accelerating
No longer is it a question of if financial institutions will transition toward the cloud, but a matter of when. As the financial industry moves to the cloud, advances in quantum computing will dovetail with cloud technologies. Quantum encryption will become real—and mainstream—in protecting financial data. Cloud providers will adopt this first and make their entire ecosystem encrypted—at rest, in transit and in memory.
Trend No. 6: Growing focus on diversity
Fintech companies will increasingly embrace fairness and opportunity for all as they seek to drive innovation and build stronger teams with more diverse backgrounds and outlooks. To accelerate these efforts, the FinTech Innovation Lab New York has partnered with Pursuit to launch Future Fintech Leaders, a program designed to create and empower diverse and non-traditional talent within the financial services industry. Graduates of Pursuit’s software development training program fill critical roles as software developers and work alongside FinTech Innovation Lab entrepreneurs to access a network of industry executives and learn how to grow a company.Download the report